Gold ends over 2% higher as Ukraine tensions spike

Gold futures at four-month high; silver prices gain 1.2%

WilliamL. Watts

SAN FRANCISCO (MarketWatch) — Gold futures surged by more than 2% on Monday as the escalating crisis in the Ukraine spurred a flight to safe assets, lifting prices to their highest settlement since late October.

Gold for April delivery
US:GCJ4
jumped $28.70, or 2.2%, to settle at $1,350.30 an ounce on the Comex division of the New York Mercantile Exchange. Prices marked their highest settlement since Oct. 28 based on the most-active contracts, FactSet data show. Earlier, prices had climbed to as high as $1,355.

‘The situation in the Ukraine is potentially one of the greatest geopolitical risks to challenge the [European Union] since the fall of the Cold War.’
Mark O’Byrne, GoldCore

May silver
US:SIK4
rose 24 cents, or 1.2%, to end at $21.485 an ounce, off the session’s high of $21.74.

“The situation in the Ukraine is potentially one of the greatest geopolitical risks to challenge the [European Union] since the fall of the Cold War,” said Mark O’Byrne, Dublin-based executive director at GoldCore, so “it should be acknowledged as at least a factor in today’s higher prices.”

Gold has “benefitted from the uncertainty ... so any bulls with a renewed sense of optimism towards the precious metal could have the $1,360 in their sights,” said Simon Smith, chief economist at FxPro in London. “Geopolitical concerns have a habit of distorting the markets and in this case they could continue to do so for as long as the Ukraine issue remains in the headlines.”

Julian Phillips, founder of and contributor to GoldForecaster.com, said in an email on Sunday that he believes, apart from a short-term influence on gold, the Ukraine crisis will “not become nearly as great a factor as Asian demand for gold in 2014.”

“Any further influence from the Ukrainian story will be indirect, but positive, for gold,” he said.

Gold closed last week in the red as a rise in U.S. consumer sentiment and strength in Chicago’s business barometer helped boost demand for U.S. equities. For the week, gold logged a loss of about 0.2% — its first weekly loss in four weeks. The month as a whole was a different story: Gold jumped almost 7% for its second monthly gain in a row.

“As ever, it is always difficult to be prescriptive and pinpoint price movements on specific events,” said O’Byrne.

AFP/Getty Images

“It is arguable, that gold could have risen over 1.5% today even if events in Ukraine were not leading to a deterioration in relations between Russia and the West,” he said. “This is because gold still has strong fundamentals which is leading to robust global demand — especially from China.”

“Investors and savers in the world’s No.1 gold-buying nation are no doubt anxious about Ukraine, but Chinese households have got other concerns closer to home,” he said. “Beijing attempted to keep a lid on that news; this morning’s sudden 3-month high in trading volumes on the Shanghai Gold Exchange suggest it failed.”

On the economic front, data from the U.S. was mainly upbeat, but that didn’t appear to dull demand for gold. January personal income and consumer spending climbed from the previous month. In February, the Markit U.S. PMI manufacturing index accelerated to a final reading of 57.1 from an initial “flash” reading of 56.7, while the ISM index rose to 53.2% from 51.3% in January.

Elsewhere in metals trading Monday, April platinum
US:PLJ4
jumped $13.90, or 1%, to $1,460.70 an ounce, while June palladium
US:PAM4
tacked on $5.55, or 0.8%, to $750 an ounce.

High-grade copper for May delivery
US:HGK4
fell nearly 2 cents, or 0.5%, to $3.17 a pound.

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